Auto sector sees minimal impact from Covid-19

Carmakers in Malaysia are only sourcing their supply chain mainly from Asean, and to a certain extent, Japan, says analyst

by AFIQ AZIZ/ pic by RAZAK GHAZALI

MALAYSIA’S automotive sector may be slightly impacted by the Covid-19 outbreak as the Chinese market does not have significant contribution to the local automotive’s production line, industry players say.

Kenanga Research analyst Wan Mustaqim Wan Ab Aziz said carmakers in Malaysia are only sourcing their supply chain mainly from Asean, and to a certain extent, Japan.

As such, Wan Mustaqim said no delay or major impact on vehicle sales could be expected, compared to the typical manufacturing businesses which involve raw materials that are largely sourced from the republic.

“As for UMW Toyota Motor Sdn Bhd (UMWT) and Perusahaan Otomobil Kedua Sdn Bhd (Perodua), possibly none of their parts are from China,” he told The Malaysian Reserve (TMR) in a text reply recently.

UMWT, when contacted, said it is still business as usual for the corporation so far.

“Our production is presently not affected. We are monitoring the situation of our parts supply as well as other areas of our business closely,” the spokesperson told TMR.

In total, 69,091 Toyota vehicles were delivered last year compared to 65,551 in 2018, while Perodua sold 240,341 cars vis-a-vis 227,243 units in 2018.

Perodua, when contacted, declined to comment.

Meanwhile, Proton Holdings Bhd and partner Zhejiang Geely Holding Group Co Ltd doubled its sales to 100,183 units compared to 64,744 cars registered in 2018, partly supported by some 29,000 imported SUV X70 from the latter’s manufacturing plant.

Recently, Proton launched the locally assembled X70, but it is believed that up to half of the model’s materials are being sourced from China.

“However, this model has reduced reliance on China’s supply chain, albeit the negative impact could be felt in the short term, while waiting for the Chinese factories to resume production,” Wan Mustaqim said.

Proton’s management was recently reported as saying that the company was “doing okay” so far with sufficient stocks of parts being sourced from the mainland.

Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad told TMR that it is still too early to predict the impact of Covid-19 for now.

“Currently, there is no impact. Perhaps, from China (parts supplies) slightly impacted,” she said, without commenting further.

An industry analyst, who declined to be named, said typically, automaker will keep at least three months’ stock to ensure smooth production.

On the same development, Proton Vendor Association (PVA) warned that the prolonged outbreak of Covid-19 in China would have ripple effects in the supply chains worldwide which could also affect Proton’s supply chain.

“Lots of our vendors depend on supply of raw materials or semifinished goods — intermediate goods from China suppliers,” PVA president Datuk Dr Wan Mohamed Wan Embong told TMR.

He said if the virus is not contained, the auto sector and other industries in Malaysia will be negatively affected, from the product supply to logistics, either by seaports or air.

Meanwhile, Japanese carmaker, Honda Malaysia Sdn Bhd president and COO Sarly Adle Sarkum said the company is still monitoring the situation closely.

“Currently, our production and operations continue as normal and we have sufficient parts,” he told TMR in an email reply.

For BMW Group Malaysia, the spokesperson said the group has yet to see direct impact of the outbreak on its sales in this country, as most of their parts are locally made or directly sourced from Germany.